National Association of Home Builders Discusses Economics and Housing Policy

Single-Family Built-for-Rent Market

Despite some recent ups and downs, the share of single-family homes built for rental purposes remains higher than historical norms. But by and large, the construction market for these homes remains a niche market, even as rental demand increased in past years.

According to data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, the market share of single-family homes built-for-rent, as measured on a one-year moving average, stands at 5% for the final quarter of 2012. This is only slightly lower than the recent peak of 5.35% set at the beginning of 2011, and is considerably higher than the 20-year average of 2.7%.

In general, with the onset of the Great Recession, the share of built-for-rent homes rose, with a dip in the share during the homebuyer tax credit period.

Despite the elevated market share, the total number of single-family starts built for rental purposes remains fairly low – only 28,000 homes started during 2012, but this total has been increasing with the overall growth for housing starts.

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If housing policy continues to be based on making it harder to buy a new home, the number of all types of rental units will continue to grow at an accelerated rate. Builders can take advantage of the spike in rents caused by people being locked out of the market by developing condo and attached to lease while rents are high and selling them when market conditions improve. Lenders and investors should be willing partners in this type of win-win plan.